How will peak oil demand affect the upstream industry?

With demand for oil in developed countries slated to begin a permanent decline by 2020, we expect to see the upstream industry become even smaller and more efficient. Operators have already begun to move away from high-cost, high-risk frontier plays, consolidating their positions and focusing on better-understood basins and near-field opportunities. Higher oil prices will be needed to ensure new development as tight oil growth runs its course, or else operators will need to rely on further cost deflation, project optimization and changing fiscal terms to keep projects competitive.

Non-OPEC decline rates remain stable until 2020

OPEC members aren't likely to see their revenues or market share significantly affected by slowing demand growth until 2035 and OPEC will need to increase its production capacity to meet demand. Those OPEC producers with rising production can expect higher oil revenues over the next decade as their market share rises - the result of increasing prices and a tightening supply and demand balance, as non-OPEC supply plateaus by 2026. However, in a challenge for OPEC producers, at the same time, they cannot ignore the prospect of peak oil demand. Where possible, some OPEC nations are preparing for a future with less dependence on oil demand.

You can read more about our outlook for OPEC and non-OPEC members in our recent report.

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